Delay in winter in US impacted Q3 earnings; will make up for it in Q4: Sabu Jacob, Kitex Garments

"Most of our business is with the US, which saw a delayed winter this year. Our clients wanted to hold their inventory due to this delay."In a chat with ET Now, Sabu Jacob, CMD, Kitex Garments, talks about the company's Q3 numbers. Excerpts:

ET Now: You have Rs 240 crore of US deposits, which you said you would use to cut your debt. How much is the net debt right now?

Sabu Jacob: Our debt has two components — packing credit and term loan. The first one stands at Rs 105 crore, and the second at Rs 33-35 crore. Of the packing credit, we have already diluted Rs 66 crore.

ET Now: What was behind the soft results this quarter?

Sabu Jacob: Most of our business is with the US, which saw a delayed winter this year. Our clients wanted to hold their inventory due to this delay. So, we had to hold back 2-3 weeks of our December shipments. That was the only reason why our income went down a little bit.

But otherwise, everything is fine. In the first week of December, we shipped whatever we'd been holding. That will make it up for us in Q4.

ET Now: Your key client Jockey seems to be slowing down. Why is that? And what has been the drag because of Jockey?

Sabu Jacob: In the US, the fashion trend has converted from cotton to synthetic materials. The business Jockey does there through our products has fallen 50% from last year. In view of that, Jockey has told us to replace cotton with synthetic.

Now, we don't make synthetic materials. So, if we have to go for synthetic, we then will have to import it from Taiwan or China. At this point, we are looking at the logistics and economics side of it.

ET Now: What is the time line for the repayment of the balance debt?

Sabu Jacob: The repayment of our Rs 35-crore term loan is going to take another two years. It is under the TUFS scheme; so we can't repay it right now.

The rest of the balance — $9 million in packing credit — will be diluted within a week or two.

ET Now: What is the update on your plan on the merger with your subsidiary?

Sabu Jacob: We have decided to go with a separate listing. We have been working on that. But as you know, because of the China issue and global uncertainties, market conditions are not that good at the moment.

So, we are just waiting. At this point, we can't really predict when we are going to list the company.

ET Now: Post your numbers, the CFO and the GM finance suddenly resigned. Was it merely the concerns over the Rs 200 crore cash, or is there more than meets the eye?

Sabu Jacob: No, all this is normal. He left because he got a better opportunity. He had submitted his resignation one month before the results.

In Kerala, that is what normally happens. Senior-level people work for a company for just 2-3 years. Three years, in fact, is the maximum. Thereafter they leave for another company and better benefits.

Same was the case with Boby Michael too. He had completed three years with our company, and left when he got an opportunity elsewhere.

ET Now: Why this long delay in the hosting the con-call?

Sabu Jacob: Immediately after the results I had to to fly to Hong Kong for an award. Then this week had holidays too. That's why the delay. There was no other issue.